Banks starting to lend again on property, says Savills
PROPERTY consultancy Savills has said that banks have begun backing new property deals in the north of England, despite the levels of UK commercial property debt being much higher than anticipated.
Speaking as the firm held its annual property finance presentation in Manchester yesterday, Savills’ local head of valuation Jonathan Langstaff said: “Within the Northern-based lending community there have been promising signs of some debt-backed investment activity, which will breathe some more oxygen in to the market.
“We are sensing that there is genuine increasing appetite to lend in the region, particularly from a number of the leading banks.”
He added that although lenders were remaining cautious there was competition developing between banks – particularly for quality secondary stock.
Savills said that £350bn of debt exists in the UK commercial property market, which is around £100bn more than previously estimated by industry experts.
Furthermore, the firm suggests that just 25% is this allocated to prime stock, implying £250bn-plus is secured against secondary and tertiary property.
The firm said that £46bn of outstanding loans are due to mature this year, and while loan-to-value breaches remain on many problem assets, loans are generally being extended – albeit on lower loan-to-value ratios of around 60-65%.
Meanwhile, DTZ’s Money into Property report showed that the value of invested property stock in the UK grew by 1% last year and is predicted to increase by 4% this year. The increases are the first experienced in the sector since 2007.
Transaction volumes also increased by 46% in 2010 to £33.4bn.
Bruce Poizer, a senior investment director at DTZ in Manchester said that prime property assets in the UK were now fairly priced and that the opportunities for investors looking for better returns lay in the market for secondary investments.
He said: “While we are seeing a discernable increase in activity levels in the North West, there is no doubt that investors remain cautious. Stock selection remains the key ingredient with some excellent opportunities in the secondary sector pointing the way to a continuing recovery over the next year.”
A Commercial Property Confidence Monitor which has just been produced by Lloyds Bank Corporate Markets suggests that 77% of investors expect the value of their assets to stay the same over the next six months, 10% expect values to improve and 13% still expect values to deteriorate – although the latter figure has fallen from a peak of 56%.
Out-of-town retail and the housebuilding sector are tipped to be the best-performing assets in the coming months.
Lynda Shillaw, Lloyds Bank Corporate Markets’ managing director of Corporate Real Estate, said: “Although the regions are generally less upbeat than the capital, confidence outside London has improved since the previous quarter and it will be interesting to watch the regional trends that emerge over the coming year.
“Competition for prime stock in London and the South East may encourage investors to look for opportunities to create value in leading cities elsewhere in the UK.”
